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Presumably to no one’s surprise, the Federal Reserve Board (Board) has just formally extended until July 21, 2017 the Dodd-Frank Act (Act) Section 619 (Volcker Rule) conformance period for banking organizations to divest ownership in certain “legacy” investment funds and terminate relationships with such funds that are prohibited under the Volcker Rule.

As is well-nigh universally known by now, the Volcker Rule is the section of the Act that generally prohibits banking organizations from engaging in proprietary trading, and sponsoring or investing in private investment funds (covered funds).

The statutory Volcker Rule conformance period ended on July 21, 2014, but in December 2013 that period was extended by the Board for all proprietary trading and covered fund activities until July 21, 2015. When the Board acted in December 2014 to further extend until July 21, 2016 the conformance period for legacy covered funds, the Board stated that it would act in 2016 to extend one more time the conformance period for such funds to July 2017. The Board was required to act in this fashion under the Act, which gives the Board the general authority only to extend for three one-year periods the Volcker Rule conformance period.

The Board’s latest action applies only to “legacy” covered funds, which are defined as covered funds that were in existence as of December 31, 2013, and to banking entity investments in, and relationships with, such funds that existed as of that date. The extension does not apply to any covered funds or covered fund relationships established after that date, or to any banking entity proprietary trading activities, all of which were required to be in full compliance with the Volcker Rule as of July 21, 2015.

Interested persons should note that this is the last of the three one-year extensions that the Act allows the Board to grant, and therefore should treat the July 21, 2017 legacy covered funds compliance date as a “hard” compliance deadline.

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